Paramount extends tender offer for WBD, urges shareholders to vote against Netflix deal
Paramount Skydance has extended its tender offer for Warner Bros Discovery (WBD) to February 20 and filed preliminary proxy materials with the US Securities and Exchange Commission to ask WBD shareholders to vote against Netflix’s amended takeover bid.
Netflix updated its bid for WBD earlier this week to an all-cash offer of US$27.75 per share, valuing the company at US$82.7bn. Paramount’s US$30 per share all-cash tender offer values WBD at US$108.4bn.
Paramount argued that its offer “is significantly greater and far more certain” than that of Netflix, pointing out that the Netflix offer could we worth even less if WBD is unsuccessful in putting US$17bn in debt on Discovery Global, which is set to be split from WBD into a separate entity.
Paramount accused WBD of “rushing to solicit shareholder approval” for the Netflix transaction, despite WBD admitting that its stockholders “will not know or be able to determine the specific merger consideration that will be paid to WBD stockholders upon consummation of the [Netflix] merger.”
“Despite the fact that the capital structure of Discovery Global will directly determine the actual amount WBD shareholders receive in the Netflix transaction, and WBD will be required to disclose such information as well as full financial information about Discovery Global at the time of the separation, WBD plans to solicit shareholder approval for the Netflix transaction without this information,” Paramount said.
“This is even more extraordinary given that the WBD board uses claims about the value of the Discovery Global equity as a basis for asserting the transaction delivers more than Paramount’s US$30 per share all-cash offer,” it added, noting that WBD’s own financial advisers had valued Discovery at just US$0.72 per share, contradicting its assertion.
Paramount went on to say that the Netflix transaction faces “severe regulatory risk” and would “materially entrench Netflix’s market dominance,” giving it an estimated 43% share of global SVoD subscribers, “leading to higher prices for consumers, reduced compensation for content creators and talent, and significant harm to American and international theatrical exhibitors.”
It added that Netflix’s regulatory path is particularly challenged in Europe, where Netflix is “by far the dominant streaming service and where WBD’s HBO Max is its only viable international competitor.”
“Netflix has unsuccessfully sought to address these concerns by putting forward a non-credible market definition of the streaming market that includes services like YouTube, TikTok, Instagram and Facebook and that no regulator has ever accepted,” Paramount said.
The David Ellison-controlled company argued that, in contrast, a merger between WBD and itself “enhances competition and strengthens the long-term prospects of the entertainment industry,” with “moviegoers, studio workers and creative talent all set to thrive thanks to the combined company’s expanded theatrical film production and content.”
It also accused the WBD board of refusing to engage with Paramount’s representatives and continuing to withhold “highly material information about Discovery Global while moving forward to seek shareholder approval that will cut off any ability for WBD shareholders to receive the benefits of Paramount’s value-maximising offer.”
For its part, WBD has repeatedly said that Paramount’s offer is not better than Netflix’s. It has also gone several steps further, stating that it sees red flags in Paramount’s financing plan. It has also pointed to Paramount’s “junk” credit rating, versus Netflix’s “investment-grade balance sheet” and US$400bn market cap as rationale for its decision.
Earlier this month Netflix said it is already “engaging” with the US Department of Justice and the European Commission as it begins regulatory processes that could take between 12 and 18 months.
US president Donald Trump has also said he will be “involved” in whether the deal gets approved in the US. Trump praised Netflix CEO Ted Sarandos in December while also saying the deal “could be a problem” due to the combined market share of Netflix and Warner Bros.
